SU4 - The ERM Process - Stage 3 - Risk Analysis

Question 1

What are the purpose of the Risk Analysis Stage?

Answer 1

To provide information on the likelihood of risks and opportunities occurring and the impact of them to aid in the decision making process.

Question 2

Explain the purpose of the Process Activities in the Risk Analysis stage.

Answer 2

The activities that need to take place are the tasks that are necessary to capture the likelihood of the risk occurring and the impact so that it can be recorded in the risk register.

Question 3

What activities need to be concluded in the Process Activity step?

Answer 3

1. Casual analysis
2. Decision analysis and influence diagram
3. Pareto analysis
4. CAPM
5. Define risk evaluation categories and values.

Question 4

Explain the casual analysis.

Answer 4

It is used to identify the root cause to prevent past mistakes to occur again in the future.

Question 5

Explain the Decision Analysis and Influence Diagrams.

Answer 5

Decision analysis is used to structure decisions, uncertain events and values of outcome.s

The Influence diagram can be used to assist in the development and understanding of the risks and the actions to be taken in the decision making process.

Question 6

Explain the Pareto Analysis.

Answer 6

This diagram commonly reveals 20% of the risks that contributes 80% of the overall risk exposure.

Thus it focuses managements attention on the risks that will have the greatest impact on the project.

Question 7

Explain the CAPM.

Answer 7

It is used to determine the expected return in relation to the risk. The market risk is measured by its beta in the CAPM.

Question 8

Define the risk evaluation categories and values.

Answer 8

This will be done through the Qualitative and Quantitative assessments.

Qualitative Assessments - describes the impact of the risks, whether it would be high, medium or low.

Quantitative Assessments - provide a numerical assessment, which will be more reliable when historical data is available.